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Bridging The GAAP: June 2024

Centri’s Bridging the GAAP newsletter highlights this month’s news, developments and emerging issues in the accounting and financial reporting world. 

FASB Standard Setter Updates

Financial Accounting Standards Board

June 4, 2024 Meeting

The Board discussed the change in hedged risk guidance for cash flow hedges, as well as transition, benefit-cost analysis, and comment period for a proposed Accounting Standards Update. The Board decided to narrow the scope of the change in hedged risk guidance to apply only to hedges of cash flow variability on forecasted interest payments on choose-your-rate debt instruments. The Board directed the staff to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board also decided on a 60-day comment period for the proposed Update.

The Board also discussed disclosures, accounting for government grants in a business combination, transition, benefit-cost analysis, and comment period for a proposed Accounting Standards Update. The Board decided that an entity should be required to provide the disclosures in Topic 832, Government Assistance, for government grants within the scope of this project. The Board directed the staff to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board also decided on a 90-day comment period for the proposed Update.

For more information, see the FASB’s Tentative Board Decisions.

June 12, 2024 Meeting

The Board discussed a fair value accounting policy election for certain noncompliance environmental credits, disclosures, and transition. The Board also considered an analysis of the expected benefits and costs of the proposed Accounting Standards Update. The Board decided that an entity would be permitted to make a fair value accounting policy election to remeasure a class of noncompliance environmental credits that are obtained in an exchange transaction or through a nonreciprocal transfer that is not a grant from a regulator or its designee. The Board decided that an entity would not be permitted to retrospectively apply a change in accounting policy for the subsequent measurement of an eligible class of noncompliance environmental credits from historical cost to fair value. The Board directed the staff to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board also decided on a 90-day comment period for the proposed Update.

For more information, see the FASB’s Tentative Board Decisions.

June 18, 2024 Meeting

The Board discussed recent feedback received from stakeholders on the March 20, 2024 Board decision on targeted improvements to Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software. The Board acknowledged that the targeted improvements would require entities to use judgment in evaluating when to recognize software costs. The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board also decided on a 90-day comment period for the proposed Update.

For more information, see the FASB’s Tentative Board Decisions.

EITF Updates

Emerging Issues Task Force

EITF Recommends Project on Determining an Accounting Acquirer

On June 14, 2024, the reconstituted EITF deliberated Issue 24-A, Determining the Accounting Acquirer. The EITF recommended that the FASB add a project to its technical agenda on how to determine the accounting acquirer when a variable interest entity is acquired in a business combination effected primarily by exchanging equity interests. The FASB will determine whether to add the project to its agenda at a public meeting in July.

IASB Standard Setter Updates

International Accounting Standards Board

Narrow-Scope Amendments to Classification and Measurement Requirements for Financial Instruments

The IASB issued amendments to the classification and measurement guidance in IFRS 9, Financial Instruments. The amendments are in response to feedback from a post-implementation review of IFRS 9 and are intended to clarify the requirements and address diversity in practice. The amendments are effective for annual reporting periods beginning on or after January 1, 2026.

SEC Regulatory Updates

Securities Exchange Commission

SEC Filer Status Assessment for Calendar Year-End Public Companies as of June 30

US public companies are required to calculate its public float as part of the annual assessment of its accelerated filer status as of the last business day of its most recently completed second fiscal quarter. SEC accelerated filer status (i.e., large accelerated filer, accelerated filer, non-accelerated filer) can impact both a company’s SEC filing timelines as well as certain disclosure requirements (e.g., whether or not an auditor’s attestation is required for internal control over financial reporting under Sarbanes Oxley Act section 404(b)). In addition, an emerging growth company (EGC) that becomes a large accelerated filer would no longer qualify as an EGC.

Fifth Circuit Court of Appeals Vacates SEC’s Private Fund Advisers Rulemaking

In August 2023, the SEC adopted new rules aimed at enhancing private fund investor protection. In September 2023, industry groups filed a joint petition against the SEC claiming that the private fund adviser rules exceeded the Commission’s statutory authority and did not comply with certain requirements for rulemaking. The petition also claimed that the rules would be overly burdensome to implement.

On June 5, 2024, the Fifth Circuit Court of Appeals vacated the SEC’s private fund rulemaking package. The court cited that the SEC exceeded its statutory authority in adopting these rules. It is unclear at this point whether the SEC will appeal the decision.

SAB 121 Withheld with Presidential Veto of its Repeal

While the House and Senate voted to repeal Staff Accounting Bulletin (SAB) 121, which requires custodians of crypto assets to record a safeguarding obligation and related asset, President Biden has vetoed the bill believing the resolution would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues. As a result of the veto, entities that file financial statements with the SEC must still consider whether SAB 121 is applicable to them.

Staff Issues Statement on XBRL Tagging of Earnings Per Share

The SEC staff recently issued a statement on XBRL tagging for earnings per share (EPS) data following observations of companies applying differing approaches to tagging the earnings per share information when basic and diluted EPS are the same. When basic and diluted EPS have the same value and are presented only once on the face of the income statement, the staff recommends that companies tag the amount twice using both the GAAP basic EPS and the GAAP diluted EPS tags.

For more data quality reminders, see Staff Observations and Guidance.

Other Regulatory Matters

Exposure Draft of Chinese Sustainability Disclosure Standards Released

On May 27, 2024, the Ministry of Finance of the People’s Republic of China issued an exposure draft for the Sustainability Disclosure Standard for Business Enterprises – Basic Standard. Sustainability Disclosure Standards for Business Enterprises for the People’s Republic of China (“CSDS”) will be made up of the basic standard, specific (thematic) standards and application guidance. Along with a standard on climate-related disclosures, a number of thematic standards in the plan cut across each of the streams within environment, social, and governance topics. A set of application guidance will interpret and provide guidance on both the application and industry-specific perspectives. Other supporting guidance may be issued as and when needed to support application.

China will issue the climate-related disclosure standard as well as all of its accompanying guidance by 2027. By 2030, the entire suite of CSDS and its accompanying guidance will have been issued. The adoption process will be phased in and cascade from: (1) listed companies to non-listed companies; (2) from large companies to small and medium-sized companies; (3) from qualitative disclosures to quantitative disclosures; and (4) from a voluntary basis to a mandatory basis. During the interim period as the suite of CSDS is being developed, other regulatory departments can issue their respective disclosure guidance as deemed necessary.

Rikki Williams

Senior Director | CPA

Rikki is a Senior Director at Centri Business Consulting. He has more than 16 years of public and private accounting experience. View Rikki Williams's Full Bio